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This alert will be permanently deleted.
Good day, ladies and gentlemen, and welcome to the Colfax First Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, today's conference is being recorded.
I would now like to turn the call over to Kevin Johnson, Vice President of Finance. Sir, you may begin.
Thank you, Sydney. Good morning, everyone, and thank you for joining us. My name is Kevin Johnson, I'm Vice President of Finance at Colfax. Joining me on the call today are Matt Trerotola, President and CEO; and Chris Hix, Senior Vice President and CFO.
Our earnings release was issued this morning and is available in the Investors section of our website, colfaxcorp.com. We will be using a slide presentation to walk you through today's call, which can also be found on our website. Both the audio and the slide presentation of this call will be archived on the website later today and will be available until the next quarterly earnings call.
During this call, we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in our SEC filings. Actual results might differ materially from any forward-looking statements that we make today. The forward-looking statements speak only as of today, and we do not assume any obligation or intent to update them, except as required by law.
With respect to any non-GAAP financial measures made during the call today, the accompanying reconciliation information relating to those measures can be found in our earnings press release and today's slide presentation.
Now I'd like to turn it over to Matt, who will start on Slide 3.
Thanks, Kevin, and good morning. I'm pleased to report that we're off to a great start in 2019. First quarter results were a bit better than expected and our first month of DJO was in line with expectations.
Fabrication Technology achieved its ninth consecutive quarter of core sales growth. All major markets grew fueled by price that is offsetting steel and other inflation.
Air & Gas Handling drove its third consecutive quarter of double-digit order growth, with all end markets moving in a positive direction. We increased margins 160 basis points through productivity, pricing and strong project execution.
The DJO integration is on track with initial focus on operational improvement, growth acceleration and transitioning to a CBS culture of continuous improvement.
Moving to Slide 4, you can see ESAB's continued growth trajectory. In Q1, margins improved as planned, up 20 basis points year-over-year and up 180 basis points sequentially. Our Fab Tech business margins are improving on the strength of restructuring, productivity and pricing actions.
While we have converted to adjusted EBITA to simplify reporting, we still have conviction and line of sight to drive to 15% AOP.
Our mid-single-digit growth was driven by price as volume flattened in the quarter, but we still saw positive volume growth in our flow business, part from market and part from share gain. We continue to make great progress across a range of growth initiatives in both equipment and consumables, and customers are excited by our lineup of new products and technologies.
A great example is a new automation product called Versotrac, the most versatile and user-friendly tractor on the market. The tractor allows the mechanization of certain welding processes to improve productivity and quality. Versotrac is unmatched in terms of affordability, uptime and ease of use.
The GCE acquisition is performing well, and we're thoughtfully integrating our businesses in the welding market, while driving growth initiatives to expand our position in specialty gases that serve attractive markets like life science research and health care.
Slide 5 shows continued very strong growth in Air & Gas Handling orders in the first quarter. Our core industrial orders grew 21% on top of 24% in 2017 and 19% in 2018. We are clearly benefiting from the strategic shift in this business over the past few years. Orders in all other key end markets also grew, consistent with the long cycle recovery momentum.
Oil and gas was up 38% and the profitability of new orders continues to improve. Mining orders grew organically 29%, and our mining project funnel and outlook remains in good shape. Our power orders grew 11%, and we believe this part of the business has stabilized, with improving prospects in Asia.
Air & Gas Handling margins improved to 11.3% in the first quarter, as shown in Slide 6. This improvement resulted primarily from restructuring programs, improvements in executing customer projects and strategic choices in oil and gas to focus on higher-margin projects. This is a very strong start and sets the path for a significant expansion in margins for the full year.
Sales in the quarter were lower than the prior year, including FX pressures, but higher orders over each of the past 3 quarters have created a healthy backlog that supports our forecast for sales growth in the back half of this year.
Slide 7 summarizes results in our new Med Tech segment. The DJO acquisition was completed on February 22, so the first quarter results only include 1 month of performance.
Sales of $124 million and adjusted EBITA of $26 million in March were both in line with expectations. March and Q1 year-over-year core revenue growth were both positive, led by performance in the reconstructive business.
DJO launched 6 new products in the first quarter that will contribute to an improving growth trajectory later this year and in 2020. For example, the DJO Surgical AdapTable Arm launched in March is the first fully sterile, surgeon-controlled leg and retractor holder for hip implant surgery. The AdapTable was recognized as 1 of the 10 products you need to know at the recent 2019 AOS -- AAOS meeting by the MDO organization.
Like the Versotrac in ESAB, this type of mechanization in implant procedures is expected to be an attractive area for differentiation that will support the business and continue to gain market share.
On Slide 8, I want to share with you our progress integrating DJO and creating a healthy path for sustained performance improvement. All of DJO's key leaders have attended CBS leadership training, and we're quickly cascading foundational training throughout the business. We're collaborating with the DJO team to strengthen the operating discipline through monthly operating reviews that are supported by aggressive weekly and daily management. Our initial CBS focus areas are the completion of the transformation projects and transition to a continuous improvement culture.
We're working closely together to improve delivery and service in the performance and rehab segment. And this will support growth acceleration and lower structural cost. We're also focused on procurement and value engineering to offset inflation and support margin expansion going forwards.
In addition to these supply chain areas, we've targeted the reimbursement and product innovation processes as key opportunities for CBS to support accelerated growth.
On Slide 9, we look ahead. We've made significant improvements in our Air & Gas Handling business that are now reading through, with consistent growth in orders and margins, and the business is expected to return to top line growth in the second half. This improved business performance is creating a healthy level of interest from potential acquirers.
Our Fab Tech business continues to grow in line with expectations outlined earlier this year, supported by our global strength, new products and pricing.
The integration teams at DJO and Colfax are working quickly and effectively to minimize disruption while accelerating business improvements. Everyone's excited by the opportunities ahead.
Wrapping up, we're off to a great start to what I expect will be a very successful year for Colfax in 2019.
I'll now hand over to Chris.
Thanks, Matt, and good morning. Continuing on to Slide 10. Company sales grew 14% in the first quarter to just over $1 billion, reflecting 2% organic growth and 19% from acquisitions, including 14% from DJO.
We also faced a 6% currency translation headwind in the quarter from a stronger U.S. dollar, mostly compared with the Argentine peso, the euro and the Russian ruble.
We grew gross profit by $87 million in the quarter and gross margin by nearly 5 full points, 220 basis points from operating improvements and 260 basis points from acquiring the higher-margin DJO business.
Higher gross profit contributed to better operating profitability. Despite over $6 million of year-over-year FX translation pressure, adjusted EBITA increased $36 million and margins increased 230 basis points to 14.6%.
Below the line, interest expense was consistent with our expectations and will increase in Q2 as we recognize a full quarter impact from the DJO acquisition.
We continue to expect a full year tax rate of 22%, which implies a lower rate for the remainder of the year to offset the higher Q1 rate.
Overall, EPS of $0.53 was slightly ahead of our expectations and represented 10% growth, despite a translational FX headwind of about $0.04.
A few other Q1 housekeeping items to note. First, our Air & Gas Handling business completed the tender of all shares of its publicly traded subsidiary in South Africa, increasing its stake from 55% to 100%, following an investment of $93 million.
Second, one of our largest U.K. pensions went into buyout and recorded a $44 million noncash charge. This action is similar to our Q4 2017 buyout of a different pension, which also created a longer-term derisking benefit for Colfax.
Third and lastly, as expected, our cash flow in the quarter included $56 million of strategic transaction costs and $16 million of DJO working capital investment that we signaled to you in our previous call. You should expect to see another $20 million to $25 million working capital investment in Q2.
Slide 11 shows the EPS growth outlook for the first half of 2019 compared with $1.09 in the prior year. During the first half of 2019, we expect strong operating performance from the Fab Tech and Air & Gas Handling businesses, supported by current momentum and outlooks.
We continue to forecast the DJO acquisition to be accretive and the other recent acquisitions such as GCE are delivering expected results.
We anticipate FX to remain a headwind in the second quarter versus the prior year. At current rates, year-over-year pressures would ease in the second half.
As a reminder, last year's Q2 tax rate benefited from the onetime implementation catch-up of R&D tax credits that will not recur this year.
Our outlook for the full year on Slide 12 is not changed. We continue to guide $2.55 to $2.65, which represents growth of 10% or more for the year.
The Fab Tech market conditions are expected to remain constructive for the rest of the year, with strong price offsetting inflation and currency pressures.
Air & Gas Handling performance should continue to improve as we progress through 2019, supported by recent strong order growth, restructuring actions and improved order quality.
The DJO integration is progressing well and performing in line with expectations. Seasonal revenue patterns, completion of large operating improvement projects and early CBS contribution should drive improvements throughout the balance of the year.
That concludes our prepared remarks. Operator, please open up the call for questions.
[Operator Instructions] And our first question comes from Jeff Hammond with KeyBanc Capital Markets.
So just on welding, good -- very good price; volumes, a little bit lower. Can you just talk about as you go through the year, when you start to lap some of that price action? And kind of just talk about where volumes might be more mixed, given some of the more mixed macro news we're seeing and where are you seeing maybe areas of resiliency?
Yes. Sure, Jeff. First, on the price question. Certainly, in Q2, we started to lap it a little bit, but it's really the back half of the year where we significantly lap some of the pricing actions. And so the price impact will start to fade as we go through the year. And we expect -- our plan was to have some volume growth in the year, and we still fully expect to have the volume growth needed to get to that mid-single digits plan number that we put out there.
In terms of how different places in the world are playing out, certainly, the North American market slowed down a little in the first quarter as expected and planned after a strong back half of last year, but we still see that as a positive growth market.
European market is in a similar place it's been the last few years with some parts of the market growing and some parts of the market not growing. We've been able to consistently grow over there and think that we've been able to take some healthy share.
And then in the emerging markets around the world, there's some positive momentum in some parts of South America, turning over to some decent volume growth. India's still in a healthy volume growth range. And some recovery starting to come through in places like the Middle East and Asia, Asia outside of China. And while China has some industrial pressure on it, the infrastructure investments in China are still on a pretty healthy clip. And so we've been able to stay in a positive range there.
Okay. And then just to understand the first half, second half guidance a little bit better. Is that a function of more Air & Gas seasonality? Or can you help us with how you're thinking about DJO for Q2 and how the seasonality lines up there?
Yes. So typically, in the DJO business, Jeff, you'd see the lowest quarter being in Q1 and the strongest in Q4, with a development from Q1 or a step up from Q1 into Q2. The transition from Q2 to Q3 can be generally not a lot of change in the sales level sequentially and then it does step up in Q4. It's typically what the business has seen, and that's in line with our expectations for the year.
In terms of the Air & Gas Handling business, we expect to see similar patterns to what you've seen in the past there, again, with the lowest Q1, a little bit of a step up in the sales levels as you head into Q2 and Q3 generally trading to be up or down a bit. And then of course you step up into a Q4 level. So typical seasonality that you'd expect to see in the business.
Okay. And then just 1 housekeeping item. What's -- how are we looking for tax rate for 2Q and for the rest of the year?
Yes. So for the full year, Jeff, we're still expecting the rate to come in at about 22% or so. It was a little higher in Q1 and that implies it will -- we'll be doing some work to offset that in the -- in Q2, 3 and 4. So you expect to see the rate below the 22% level, just to get it to average out to 22% for the year.
And our following question comes from the line of Nathan Jones from Stifel.
Just wanted to follow up on the welding volume side of that. Did I hear you, Matt, say you still expect volume growth for the year in the mid-single digits?
No. Our guidance for the year was mid-single digits overall core revenue growth. And so obviously, a decent chunk of that comes from price and then the rest comes from volume. And we still have an expectation it'll be able to be in a positive volume growth range.
Okay. So you would expect the price tailwind to fade here just as you lap comps and that should be made up by a little bit of accelerating volume?
Yes. That's correct. As I said in my comments, our flow business had positive volume growth in the first quarter. And so really, it was we had less cutting systems shipped, sort of strong shipments of cutting systems last year, a little less shipped in the first quarter this year. And our funnel and backlog shows that that'll correct itself in the next quarter or 2 here.
Got it. And then you guys said that you had line of sight to adjusted operating margins of 15%. You've got, I just worked out about 130 basis points of amortization in that, so 16.3% on the way you're reporting it now. Can you maybe talk about the things that you have line of sight to that gets you to that kind of number? When we should recognize those things? And any kind of estimate you can give us on when you should get to that margin level now?
Yes. I mean as you can see, we've started the year right where we need to be versus our plan. We're already in the range of what we put out there as guidance for the year, and so that has us in the right range to execute through this year's plan. And as we've talked about previously, we've built some good price muscle through the last few years. Unfortunately, it had to be exercised, just to offset a lot of inflation. We expect that as steel flattens and some of the other inflation flattens, which is starting to happen here, that we'll be able to more selectively exercise that price muscle and get a little bit of net price as things flatten or even turn down. And then we'll -- we've also got productivity programs ongoing. And then need to have a little bit of volume growth in the next couple of years to get the rest of the way to that 15% AOP. And we'll take you through later -- later in the year, at Investor Day, we'll give an update more on an EBITA basis. But we just wanted to be clear that we haven't lost the trail on the AOP at 15% commitment.
And our next question comes from Joe Giordano with Cowen.
So I wanted to start on Air & Gas. Obviously, good quarter there in orders and on margins. So just curious as the -- as we move through the year, how much of that is kind of pulled in? How does the funnel look on the order side? What is the outlook for incremental spending there for the rest of the year? I mean obviously, you're -- the business you're trying to sell is still having good quarters. [ So at least to ] this year, it kind of makes sense. But just curious as to how sustainable some of these metrics are for the remainder of the year should it remain under your ownership.
Yes. First, I'd say that a good strong first quarter on the back of a few other quarters of strong order growth is really driven by a healthy market environment across all of our end markets, really a healthy long cycle recovery there as well as strong execution by the team and not by any kind of fire drill order pull-ins. I think we certainly didn't need to be above 20% to show a good strong quarter of growth.
We still see healthy growth in the second quarter and very clear line of sight on the mid- to high single-digit order growth that we signaled for the year with obviously the possibility of healthier than that based on how we've started. But we have healthy funnels, and April was another good month of orders there. And so things are in -- on a good track there.
And on the margin front, this was a good strong start, really showing that the improvement that we made down the back half of last year are structural and sustainable. And as the volume grows through the year in that business and we continue to see read-through of the improvements we've made, we can continue to improve margin through the year in the business.
And then, Chris, on the full year guide keeping flat there, can you kind of talk through some of the puts and takes, like how much more is FX of a headwind inherent in that guide than 3 months ago? How much is -- was operationally kind of left -- moved higher within the context of a flat, like, headline number?
The view that we've taken is: number one, the FX rates really haven't changed significantly over the last 3 months. And so far, this is playing out in line with what we'd expected when we put together the guidance back in December, and then reaffirmed in February and again in March.
From a -- the other puts and takes. As we looked at this, it's really the start of the year. There's some good things that are playing out. It's a bit early for us to be moving the guidance around. But clearly, there's some good operating momentum. As Matt mentioned in the Air & Gas Handling businesses, we see that continue to play out, that represents upside opportunity for us. But we're just at the beginning of the year and thought it was -- thought we'd keep the guidance in place.
Okay. And then maybe last for me. Matt, I know it's early DJO, early stage with them, but kind of your initial impressions as you start talking to their business leaders there. Just kind of can you take us through your thought process for the last month? What you've been spending time on and what you've seen?
Yes. Sure. We've spent over the last couple of months quite a bit of time with the leadership team there, doing CBS training and assimilation and starting to dig in on some of the key operational issues and working on our 100 days strategic plan, where we focus on some of the key strategic focus areas together. There's great talent there. The leadership team's got some terrific experience. They're very excited about being a part of Colfax and have embraced CBS as a way to accelerate the progress in the business and to really transition from a couple years of more kind of big project-based transformational change to more of a long-term steady-state continuous improvement culture. So some great -- great start there.
And I've also gotten to meet a lot of the talent further in the organization, the GMs that run different parts of Europe and some of the key marketing and technology folks in the bracing business and in the surgical and other businesses. And there's a lot of great talent in this business that is energized and excited about the opportunity that we've got ahead.
There's obviously some heavy lifting out of the gate. There always is when you go through a transition like this. But I think there's some very good positive energy about where we'll go together.
And our next question comes from the line of Julian Mitchell with Barclays.
This is [ Lee ] on for Julian. Despite the increase in adjusted net income, free cash flow became even more negative year-over-year. I understand the strategic transaction costs and DJO working capital headwinds. But could you just walk us through the free cash flow outlook for the rest of the year? Are we still on track for the original $190 million to $210 million guide?
Yes. Yes, we are -- we're still on track for the $190 million to $210 million. As you can imagine, we anticipated the payment of these transaction-related costs when we did our guidance. And we also planned for the working capital investment that we would make in the DJO business in the first 2 quarters of this year. So we're -- we remain very much on track.
Okay. And what was the actual DJO organic sales growth rate for the first full quarter? And is the 1% to 3% organic growth rate still the right assumption?
Yes. The core growth in both March and the first quarter was a little bit positive, in the kind of 1% to 2% range. And so we still very much see that 1% to 3% core range as the right full year outlook. Q2 is a tougher comp. They had a pretty strong Q2 last year. And so we expect to stay in a similar range as we work through Q2, but then have some acceleration in the back half of the year.
And our next question comes from the line of Joe Ritchie with Goldman Sachs.
Can we start on just the 2Q bridge for a second? So I think your implied earnings guide is about $0.58 to $0.61, and that's just a little bit lower than typical seasonality. And so I know you guys have called out tax and FX as headwinds. But is there -- are there other things that we need to consider from just a growth perspective or from an incremental margin perspective as we think about 2Q?
No. I'd say the -- you've got the primary headwinds there. FX is a year-over-year headwind that we think will be similar to what we encountered in Q1. We've obviously got a difference in the tax rate over the prior year. We're on a good trajectory for the year. Last year just had the benefit from the R&D tax credits that we went after for prior years. That was facilitated by the sales of Fluid Handling business. And so I'd say that those are really the 2 key items.
The other thing to note is that the financing that we did in conjunction with the DJO acquisition, we get the full -- the first full quarter of that in Q2. So Q1 reflected part of the interest cost and the equity issuance that we did and then Q2 will reflect the full impact for that.
Okay. All right. No, that makes a little bit more sense. And then I guess my second question, there have been some reports out there regarding potential auction process for the Air & Gas Handling business. You guys made comments earlier that it was proceeding with speed. So to the extent that there is anything else that you can tell us around how that progress is working and, I guess, what your expectation would be, that would be helpful.
Yes. Well, first, the business is performing very well, and I think that's always a good thing when you're going through a process like this. It's a robust process as we've talked about before, and we still have a full expectation that we'll complete the process here in the first half of the year. And then complete the transaction in the second half of the year, consistent with what we've said before.
Okay. Okay. Great. And then maybe my 1 last follow-on here is just on DJO. And as you're thinking about the platform or adjacency opportunities, like, is this something that when you're thinking about kind of like the expediency of adding to DJO, is this, do you think, going to be kind of like more of a multiyear process, deleveraging and then pursuing M&A? Or do you think that you can maybe get at it a little quicker once you get this transaction taken care of on the Air & Gas Handling side?
Yes. So first I'd say, certainly, the Med Tech space and the orthopedic solutions area within that Med Tech space have ample opportunity for both small and larger bolt-ons that'd be attractive ways to strengthen and expand the business.
Second, we've consistently said that 2019 is going to be about operational progress and deleveraging and really, not a focus on bolt-ons. We've got ones we've done in the past few years that are performing well, and we're focusing on make sure that they deliver their full potential. But with the other things we need to focus on in 2019, we don't expect to be doing any significant bolt-ons. But certainly, as we turn the corner over into 2020, we expect to be working a proactive pipeline there and looking to be able to get back to bolt-on acquisitions that strengthen and expand our platforms.
And our following question comes from the line of Andrew Kaplowitz with Citi.
Matt, you mentioned the 6 new products you introduced at DJO. How long does it take in the Med Tech space to really gain penetration and help your overall growth? And now that you've owned the business for a little bit of time, when would you anticipate a step up in growth in that prevention and rehabilitation business?
Yes. So obviously, by the time we launch the product, they've been through the regulatory approvals and things, so we're ready to start selling them. And I think like other industries, there's some benefit from the new products themselves. And there's some benefit from just having a fresher new product line and how that affects the channel and how they view you. And so we certainly feel like as we work through the next few quarters, the benefits of those new products should start to show up.
We've actually got 17 new products coming through total this year in DJO. And so as we get to the back half of the year, we expect the operational improvements and the new products coming through to be able to accelerate the growth, get that part of the business over into a positive growth range, in line with our plans.
That's helpful. And then just shifting to Air & Gas. Obviously, power's been a pretty difficult market for you, but you did record 11% order growth there. You specifically mentioned some recovery in the Asian power. So maybe you can talk about that, what you're specifically seeing in power now?
Yes. Again, we've been consistent that we see power as a flat market, but then any given quarter, there could be some ups and downs based on the newbuild part in particular. And the industry has gotten back to a little bit of capacity build-out in Asia, and then there's also an environmental opportunity in India that will play out over the coming years. And I'd say both of those are contributing just a little bit in terms of positive order flow and positive sort of funnel and opportunity to keep that business flat or better going forwards.
And then more quick one for Chris. If tariffs do move to 25%, how should we think about price versus cost for you guys? Can you maintain sort of the positive price dynamics that you have in Fab Tech at this point?
Yes. So the tariffs that have hit to date, the majority of them that we've been able to pass through pretty quickly to the market. And the -- then there's a small amount that we've absorbed in our equipment and are working on some different supply chain options in order to be able to offset that. And a new round of tariffs, we'd expect to be able to pass through quite quickly, based on the nature of those. Some of the other price increases take a little bit more time, whereas the tariffs, based on the nature of them, are something that typically we can turn around and pass through quite quickly.
And our next question comes from the line of Nicole DeBlase with Deutsche Bank.
So maybe starting with Air & Gas Handling. The margins were really impressive this quarter. Just thinking about, I know you guys talked about this is like a potential source of upside throughout the rest of the year. But is there any reason why this level of improvement that you saw in margins isn't sustainable as we think of like phasing of backlog coming through revenues, maybe the phasing of the restructuring payback that you'll see this year? If you could just talk through that, that would be helpful.
Nicole, the margin improvement on a year-over-year basis is something that we see as something that we can continue as we work through the year. It's really based on structural improvement to the business; choices we've made about what projects to do or not do; restructuring that we've done and more of which comes through; pricing actions on aftermarket that are sustainable; and then ongoing productivity in the business. And so we see those as sustainable as we work through the year, and we should be able to kind of hold the year-over-year gains consistently.
Okay. Got it. Great. And then just as my follow-up, if we could talk a little bit about what you saw within oil and gas for the quarter. What drove that 38% organic order growth? And whether you're seeing a pretty good pipeline for continued order growth throughout the rest of the year?
Yes. So I mean I think we've consistently said that there's a healthy amount of projects out there, but they tend to even now start and stop. And it doesn't affect us as much because we're no longer going after the big low-margin ones. But the smaller ones tend to -- some come in some quarters and some come in other quarters, but the pipeline remains healthy, based on the environment there, the oil price level environment. And so this quarter, we were a little heavier on the projects. We don't see that as a new reality of that level of growth rate, but we do see it as a positive signal that, that long cycle recovery continues and we expect to continue to have a positive momentum in that piece of the business.
And our next question comes from the line of Matt Trusz with G. Research.
So you mentioned the order strength for Air & Gas in April. Can you comment on the overall industrial trends you've seen in 2019 year-to-date? Specifically, did you see like a weak January and stronger March, like several of your peers? And are you seeing more broadly the March trend hold in April? And has there been any change in level of customer caution or confidence?
Yes. So in terms of the industrial question as it relates to the Air & Gas Handling, we're seeing -- continuing to see healthy demand there. And some of that's market-driven and some of it is based on some things, regulatory-driven things from the Chinese government that are generating demand as well.
I think the second part of the question sounded like it was aimed more at welding. And I'd say yes, we did see a little slower start to the year in January, but then the quarter rounded out, as we've shared here, in the mid-single digits range. And our plan for the balance of the year is to stay in that mid-single-digit range and the way that we've started the second quarter would say that we're on track for that.
And to follow up on that. To the extent that you have visibility of the Fab Tech end markets, are you seeing long cycle performance quite strong there, similar to at Air & Gas? And then would that mean -- to what extent are you seeing short cycle general industrial more weak?
Yes. Sure. I think certainly, I think some of the things that are fueling the demand in Fab Tech are long cycle and infrastructure are the things that are the healthier parts of the demand and there's no question that some of the pieces like automotive that we participate in a little less are tailing off. But overall, there's still a positive growth environment there.
Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back to Kevin Johnson for closing remarks.
Thanks for joining us today. We look forward to speaking to you on our next call.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.